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New investor help - vanguard LifeStrategy fund with a possible 2015 crash.

I am 32, and have £12,000 savings to invest with in my ISA wrapped Stocks and shares account.

I have been reading more into 'passive index funds' as my life is busy and I do not have the time or actual stomach to manage my own stocks right now. I would like to store it away in funds and leave it be to grow.

I did some research into Vanguard index funds, the Vanguard US site is different to UK and in my broker platform (iWeb share dealing) the option to invest into the US lifestrategy funds are not allowed.

1) Due to this, I was considering the LifeStrategy funds offered from their UK site - the 80% blended equities fund.

Has anyone within the UK invested in the US lifestrategy funds over the UK offered ones? and why would you not invest in the UK ones instead? they still allocate a percentage of the funds to US indexes.

2) I am reading an awful lot about the worst crash in a long time due for 2015.
So I am constantly thinking WAIT, I mean is it worth investing now, or simply waiting until later in the year as if it does crash as the world is screaming, then I would be investing into the funds at a much cheaper price than now, and would not see my investment plummit so hard and give me a heart attack.

3) Would I be best to invest as one lump sum now, or use the 15k to invest say, 1k a month over 15 months? what would experts advise in my situation?

Thank you for the help....
I am new to investing, I just know I need to start in life!. I am also a little worried about the many crash stories emerging so obviously as a first time investor it would be harder to handle seeing my new investment suddenly be wiped in half over the next 12 months. I realise nobody can predict the future and may not happen, but there are just too many cries of a crash now that is hard to ignore.
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Comments

  • nickohorny wrote: »

    1) Due to this, I was considering the LifeStrategy funds offered from their UK site - the 80% blended equities fund.

    Has anyone within the UK invested in the US lifestrategy funds over the UK offered ones? and why would you not invest in the UK ones instead? they still allocate a percentage of the funds to US indexes.

    Never looked at the US ones. If you cba doing your own allocations then lifestrategy is fine. How long is your investing time period and will you be wanting to touch the money over it?
    2) I am reading an awful lot about the worst crash in a long time due for 2015.
    So I am constantly thinking WAIT, I mean is it worth investing now, or simply waiting until later in the year as if it does crash as the world is screaming, then I would be investing into the funds at a much cheaper price than now, and would not see my investment plummit so hard and give me a heart attack.

    Everyone has their own agenda and opinions when it comes to predicting crashes or bull markets. There are loads of people who claim they could see it coming AFTER the fact but surprisingly almost none who perfectly time the market in reality. There are also those who just predict a crash constantly so they can look clever and cite that when the market does inevitably suffer from one. Of course on the flipside many others constantly predict bull markets so you will buy their products.

    Bottom line is nobody knows what is going to happen to stocks over 2015 or over your whole investing time frame. Your money has the mathematical expectation of growth when it is in the market however and it does not have that expectation when out of it so which would you rather?

    You do have to be aware of the possibility of losing half your investment in quick fashion when investing in equities however and if this would cause you a "heart attack" you either need to man up or give yourself a long enough investing time frame to ride out any potential rough patches. Well either that or don't bother and choose something less risky it is up to you.
    3) Would I be best to invest as one lump sum now, or use the 15k to invest say, 1k a month over 15 months? what would experts advise in my situation?

    Drip feeding provides protection against sudden crashes. If you were to put your whole amount in on the 20th Jan and then from the 21st Jan the market plummeted for weeks on end your whole investment would suffer. If however you put in a small amount once a month then only the first portion would suffer from the full effect of this crash.

    However protecting against variance like this does come at a cost - the majority of your planned investment will be out of the market until its turn to be drip fed in comes around and will not have the mathematical expectation of growth. So with drip feeding you are giving up some total return for lower volatility. If you want to make this trade off is entirely up to you.
    I am new to investing, I just know I need to start in life!. I am also a little worried about the many crash stories emerging so obviously as a first time investor it would be harder to handle seeing my new investment suddenly be wiped in half over the next 12 months. I realise nobody can predict the future and may not happen, but there are just too many cries of a crash now that is hard to ignore.

    Read "Smarter Investing" by Tim Hale also tell us how long a time period you are looking to invest for? If you have a 30 year time scale and you are never going to touch the money my personal opinion is you should go for it with equities.
  • Thanks for the response, very helpful.

    I hope to invest this money for 7-10 years roughly. I understand what you mean with regards to the market, It is just I am constantly seeing fear for this year and everybody pointing to a mass crash, and while the money is mathematically positioned to grow in there as you say, it is also a nice feeling to think if I just hold out 6/12 months and wait I MAY get in at a much lower price and generate much better growth with it. Nobody knows, but maybe the extra year waiting to see how it fares doesn't hurt me at 32 either? hmmm...

    If I invest now, I will most likely drop feed it I think. I am not frightened of the loss in my investment and figure of speech with the heart attack talk lol, I just want to try maximise growth is all and I can't predict the future but I can see how turbulent stocks have been this last year and ponder on waiting to get in is all so If I do drip feeding will suit my mindset better I would think. Maybe invest 2,000 per 8 weeks over the 12 months instead.

    I will read up on your recommended book for sure, thanks for the tip.

    Much appreciated.
  • ChesterDog
    ChesterDog Posts: 1,146 Forumite
    Part of the Furniture 1,000 Posts Name Dropper Photogenic
    You are seeing what you 'want' to see.

    Your worry has conditioned you to focussing on doom-laden, pessimistic 'guesses'.

    Quote: "Everybody is pointing to a mass crash". No they're not. :-)

    Evetybody who is in the market, owning and buying all of those stocks right now, is not! That's quite a lot of people.

    When share values climb, the worrier doesn't buy because a correction/crash "is coming". When shares are down, the worrier doesn't buy because the market "is toast".

    Get the worrying out of your investment mindset right now.

    Be sensible - cautious even - but take a balanced view.
    I am one of the Dogs of the Index.
  • El_Selb
    El_Selb Posts: 111 Forumite
    Part of the Furniture 10 Posts Combo Breaker
    VLS 80 has been the highest performing of my investments since I started 10 months ago.

    My only regret is I dallied so long before putting my money in.

    I started with about 4K, put it all in rather than drip-fed and don't regret it.

    I read talk of a weaker first half to the year with election uncertainty then a stronger second half though so maybe drip feed till the halfway mark - if you buy into that theory!
  • jimjames
    jimjames Posts: 18,796 Forumite
    Part of the Furniture 10,000 Posts Photogenic Name Dropper
    edited 12 January 2015 at 1:56PM
    nickohorny wrote: »
    1) Due to this, I was considering the LifeStrategy funds offered from their UK site - the 80% blended equities fund.

    Has anyone within the UK invested in the US lifestrategy funds over the UK offered ones? and why would you not invest in the UK ones instead? they still allocate a percentage of the funds to US indexes.

    I'd reverse the question, why would you want to invest in the US version when you can have the UK version inside an ISA with all the tax benefits that brings.
    nickohorny wrote: »
    I
    2) I am reading an awful lot about the worst crash in a long time due for 2015.
    So I am constantly thinking WAIT, I mean is it worth investing now, or simply waiting until later in the year as if it does crash as the world is screaming, then I would be investing into the funds at a much cheaper price than now, and would not see my investment plummit so hard and give me a heart attack.

    Not sure where you're hearing about the worst crash for a long time. I think it will be some years until another crash worse than 2008 happens - and that was only 7 years ago.

    Markets rise and fall so if you're not comfortable with your money going up and down in value then investment isn't for you.
    nickohorny wrote: »
    3) Would I be best to invest as one lump sum now, or use the 15k to invest say, 1k a month over 15 months? what would experts advise in my situation?

    Personally I prefer to invest monthly but if you do that how would you feel if markets rose all year so each month bought less than if you'd invested in one go.
    nickohorny wrote: »
    ISo I am constantly thinking WAIT, I mean is it worth investing now, or simply waiting until later in the year as if it does crash as the world is screaming, then I would be investing into the funds at a much cheaper price than now
    .

    If you wait, when will you know when to invest? If it drops wouldn't you be worrying it will drop further so wait for a rise then realise you've missed the boat? Trying to time things is normally futile.
    Remember the saying: if it looks too good to be true it almost certainly is.
  • 1. Basically, don't go near the US version - you'll be taxed much more heavily ... It's something like 20% US tax on income, plus you can't usually hold them in ISAs here

    It's really only worth holding US funds in exceptional circumstances - and following very specific investment strategies


    2. No one can accurately predict the next crash (because markets don't always act rationally) but valuations (such as CAPE ratio, Price/book, Price/sales, Market/GDP, etc) are a very good indicator of future returns over the next 5-15 years

    Right now, the US is more expensive, relative to the rest of the world, than it has been in about 30 years ... The current 'bull market' is approaching its 6th year ... The confidence indicators are dropping ... The US could have another surging year (and this stage in the presidential cycle is almost always positive) but current asset prices in the US are inflated by the most aggressive QE we've ever had implemented

    It's completely unknown territory, which makes betting on continued US growth highly speculative

    One way of looking at it is on momentum, the US is the best place to be invested, but on valuation it's the worst ... Momentum usually rules in the short-term, but valuation tends to take over by about the 5 year point ... Best time to invest in the US would've been 5 years ago


    3. I think it's usually better to drip-feed ... The theoretical average return is slightly lower, but you pay an insurance policy for avoiding a big market timing mistake

    Right now, after a long bull market, years of QE, poor valuations, it would be foolhardy to invest a big lump sum ... US equities AND global bonds (the backbone of a Vanguard LS fund) are both making investors nervous

    Markets go in cycles - Vanguard LS is only being recommended now because it's done well recently ... It doesn't matter how 'rational' a strategy sounds, markets constantly surprise people

    If I wanted some good US exposure anyway (and there are some very big, forward thinking companies it may be worth being invested in) I'd look at the Scottish Mortgage Investment Trust (SMT) ... 30% US, but only the biggest, brightest, most global brands (such as Amazon) - been around 100 years - doubled market returns when Vanguard LS can only hope to match them
  • atush
    atush Posts: 18,731 Forumite
    Part of the Furniture 10,000 Posts Name Dropper
    nickohorny wrote: »

    If I invest now, I will most likely drop feed it I think. I am not frightened of the loss in my investment and figure of speech with the heart attack talk lol, I just want to try maximise growth is all
    Much appreciated.

    You are getting this the wrong way round.

    Drip feeding (which i mostly do from income) is the way to lower volatility. 'lump sum investing means you can maximize growth. But you need to be 100% sure you wont panic should a crash come?

    http://monevator.com/lump-sum-investing-versus-drip-feeding/
  • ChopperST
    ChopperST Posts: 1,257 Forumite
    Part of the Furniture 1,000 Posts Name Dropper
    edited 12 January 2015 at 5:17PM
    An article regarding CAPE shamelessly pulled from the discussion forum at Monevator comparing CAPE v real world returns below;

    https://www.kitces.com/blog/shiller-cape-market-valuation-terrible-for-market-timing-but-valuable-for-long-term-retirement-planning/

    I think its poor advice to tell the OP to avoid the US when at aged 32 he has the potential to be invested for 30 - 35 years and he can ride out the peaks and the troughs, particularly when following a drip feeding approach.

    I don't know how you know that the best time time to invest in the US was 5 years ago??? The bull market could continue for another 10 years and the OP misses 10 years of capital gains, compounding and dividend reinvestment.

    BTW I'm not a Vanguard fan either and I agree with you regards to bonds for the foreseeable future. But Vanguard is popular now as it allows DIY investors diversification across multiple asset classes and geographical locations. I'm sure most people are intelligent enough to realise that they have done well as they are an index tracker and the indices that they hold have gone up.
  • Markets go in cycles - Vanguard LS is only being recommended now because it's done well recently ... It doesn't matter how 'rational' a strategy sounds, markets constantly surprise people

    No, Vanguard LS is recommended because it is cheap and does its job well.

    Vanguard LS products don't make any claims about some understanding of market movements either.
  • ChesterDog
    ChesterDog Posts: 1,146 Forumite
    Part of the Furniture 1,000 Posts Name Dropper Photogenic
    Ryan made a really good point there...

    Markets always surprise people.

    I have lost count of the number of times they have ignored economic/political events that 'ought' to cause them to behave in a particular manner.

    Equally, I have lost count of the times I have seen them seemingly over-react quite dramatically to similar scenarios.

    Wherever you look for data - and however loudly it is trumpeted - the only thing of which you can be fairly certain is that over a longterm timescale markets go up.
    I am one of the Dogs of the Index.
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